Although I am a real estate agent, I never wanted the hassle of owning rental property. My husband and I recently met with a financial planner, who advised that our two rental properties (purchased by my husband before our marriage) should be in an LLC (limited liability corporation).
We would primarily create an LLC for our rental properties as it limits our liability. If a lawsuit is brought against the LLC, it would only affect the LLC. Ideally, we would create two different LLC’s one for each rental. Then a potential lawsuit would only affect the one. As we manage our rentals, our assets, such as our home, could be used to pay for damages if we lose a lawsuit. If we create an LLC for our rental properties, the only assets at stake are those owned by the LLC. Thus, if we made one for each rental property, in the event of a lawsuit, only the LLC and the property covered by it would be subject to claims.
This is my takeaway from my meeting. You should consult your CPA and an attorney if you are considering this. As with anything, there is always a downside.
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I have family members that own rental properties. They all use the llc system it seeems you have been given sound advice